1 May 2009

Mr Geoff Miller
Corporate Reporting & Accountability Unit
The Treasury
Langton Crescent
PARKES ACT 2600
gmiller@treasury.gov.au 
 

Dear Geoff

Termination Benefits Reform Bill

The Group of 100 (G100) is an organization of chief financial officers from Australia’s largest business enterprises whose primary purpose is to advance Australia’s financial competitiveness. The G100 is pleased to provide comments on the Termination Benefits Reform Bill.

The G100’s overriding concern about the proposals is that it represents a further erosion of the decision-making responsibilities of the directors. The directors are appointed by the shareholders to direct and manage the company in the best interests of the company and its shareholders. This proposal diminishes that role. Accordingly, the G100 does not support the proposals.

In the event that the proposals are proceeded with, the G100 believes that there are likely to be difficulties in implementing and complying with the proposed requirements including:

a. the impracticality of requiring a vote by shareholders after the termination of the employee. For example, a meeting at which such a payment is to be considered for approval could be several months after the termination occurs. This gives rise to further issues about the timing of payments etc. A more pragmatic approach would be to require approval of such contracts at their inception rather than some time after the termination of employment.

b. the use of ‘base pay’ rather than total remuneration as well as the interpretation of what is included in ‘base salary’ and how it is to be calculated. For example, it is not clear how the average annual base pay is to be calculated; and

c. the relationship between key management personnel (KMP) in Accounting Standards and the term ‘holding managerial or executive office’ which would appear to be much broader than KMP.

The G100 considers that the proposals would be better considered as part of the review being undertaken by the Productivity Commission which is undertaking a more comprehensive review of remuneration practices. Consideration by the Productivity Commission is more likely to result in a holistic and integrated approach to the issues rather than an item-by-item response.

Yours sincerely

Tony Reeves
National President